Friday, April 14, 2006

Industry Survey Predicts Changes

Industry Survey Predicts Changes

The Annual DTC Industry Check-Up from Optas indicates that marketers from pharma companies and advertising agencies expect a flat DTC spending year in 2006. Actual 2005 numbers showed about a 5% increase and most marketers surveyed indicated increases in 2006 would be less than 5% again. For the last several years marketers have been predicting a shift away from mass media towards targeted media.

The reality has been different. It is true that mass media has been losing some share to direct/Internet/in-office media alternatives. These shifts have been real but slow in magnitude. Marketers clearly want to find the golden goose of direct marketing. It has been difficult, however, to find direct programs that can achieve the scale and sales results of mass media.

The 2006 survey shows a strong desire of marketers to shift more money out of mass media to the Internet and to in-office programs. 65% of those surveyed thought that the Internet should see increased spending, with 58% citing in-office programs. Less than 10% thought television should increase. Remember, however, these are "should increase" numbers not "will increase" numbers. Marketers know they should be better targeting spending but have not been too successful doing it. In this survey, Optas says marketers are saying that they will in fact increase targeted spending, a difference from past surveys.

The issue with targeted spending has always been the size and quality of lists of prospects. Some supplier companies have been very successful identifying good audiences and have shown strong business growth. The fact is that even the best companies in this space have not grown much in absolute dollar terms versus mass media. We are seeing 5 million dollar companies grow to 10 million, but that is not much in a $5 billion market. The Optas survey indicates a huge opportunity for targeted marketing companies if they can expand their lists.

The Optas survey also showed the biggest concern among DTC mass media marketers is physician and consumer backlash. Marketers showing concern over backlash increased significantly from past surveys. Concern over new government regulations in 2006 dropped somewhat because marketers know how slow that process can be.

The implications of the Optas survey are that DTC marketers believe they should be finding alternatives to mass media. The reality is that it is not easy to replace mass media with direct and relationship programs that can deliver comparable sales. What the desire to shift indicates is that mass media companies need to be careful about their pricing/efficiency and targeted companies need to be offering larger reach opportunities to drug clients. It is clearly an evolutionary shift that will take years to be significant in terms of dollar shift. The best hope for relationship companies is that the FDA makes mass media impractical by increasing risk disclosure requirements. This is unlikely to occur in 2006-7 because of positive industry changes in their creative style (more sober) and risk disclosure actions (more emphasis). Of course a Democratic victory in 2008 could change the desire of the FDA to restrict DTC. We will all have to wait and se! e on t hat possibility.

Bob Ehrlich, Chairman
DTC Perspectives, Inc.

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